Ok, I downloaded the PSD plugin Source code and had a look at what was happening and at why this plugin wasn't allowing Xion to properly read the track, time, etc layers.

Basically the Plugin was saving each layer, the same size as the document. So if the document was 200x200, each layer, no matter what size the layer, would be saved with 200x200 worth of pixel data. Most of it transparent.

So what I've done is I modified the way that the plugin saves out the layer data so that it only saves out the data that isn't transparent. This is exactly what Photoshop does and is one of the reasons that the Photoshop files are a lot smaller.

It came up as 319KB. I then used my version of this plugin and saved the same file again. This time it saved as 57KB.

So not only are Paint.Net saved PSD files now smaller, but now all text and other layers work in Xion too!

One thing to notice, is that the Paint.Net plugin doesn't actually support RLE compression by the looks of the source, so some PSDs will still be larger than when you save them in Photoshop, but that shouldn't matter too much since you zip them for the final skin anyway.